Dividend Policy Essay Example | Topics and Well Written Essays - 1500 words

Dividend Policy - Essay Example Lack of infrastructure and basic facilities would lead to downfall in prices of the land and investors will lose faith and retract the investment. This would be huge disaster for any businessman. One of the problems with real estate investment trusts (REIT) is that the investors tend to over invest and still REIT's must distribute most (about 95%)of the taxable income to the shareholders. Therefore before putting a land to sale check the basic amenities and infrastructure and the price of the land accordingly. UK has become a hotspot for real estate business domestically and internationally. The main reason for this is the presence of strong infrastructure and basic facilities like water and electricity. One of the important factors that have increased the real estate corporate is the high rate of ownership. Real estate has become an alternate investment in UK. It is not sure that how dividend policy affects the value of a firm and the debate still goes on. Some say shareholders wealth is increased by dividends, others believe that dividends don't affect firm's value in other words they are irrelevant and some more believe that shareholders wealth is decreased by dividends. A general definition of valuation of property is to state the actual value of the property both according to the government and private (commercial) sector. But government will valuate only landed property and fertile land. While valuating a property government will not consider the commercial demand that property is possessed with.Financial policy decisions include dividend decisions and according to a financial management research investment is considered as an exogenous variable. Influence of stakeholders has a greater affect on firm's dividend policy that can be observed by examining dividend and investment policy's interactions. Not only the stakeholders but also non-investor stakeholders and capital suppliers plays a greater role in affecting the firm's dividend policy. Some financial theorists were able to provide a hypothesis foe dividend policy irrelevance. The assumptions of this theory are Perfect capital markets, in other words non existence of taxes transaction costs, a single buyer or a seller cannot influence the market price which in other words termed as non existence of monopoly in the market and information should be accessed without any cost that is free of cost. There should be reasonable behaviour on the part of those who are taking part in the market. The future cash flows on the discounted value that are accruing to investors should have valuing securities. Certainty of the firm and investment policy and as well as having complete knowledge of future cash flows on the discounted value are considered important in this theory. Managers are considered as agents of the stakeholders. One assumption that not hold good is about the certainty of the investment policy of the firm which is critically viewed. A model was developed by Titman that hypothesises an interaction between investment and financial decisions. According to this model non-investor stakeholders wealth in a firm can be maximised by those equity holders who possess incentives. A company or a manufacturing unit intending to set up its own plant in any country has to look up, analyze and study the respective location then plan to take up the initiative. It has to take into consideration - all